Davis to Steer Clipper Fund

Under Gipson and Pacific Financial, Clipper became renowned for holding stocks of large U.S. companies that trade at prices significantly below PFR's estimate of their intrinsic values. Gipson and company are also well-known for holding large cash positions when they believe they can't find any stocks that meet their value-based criteria.

Clipper's large cash stake, which is currently over a quarter of the fund, has hurt it in recent years as the markets have moved up moderately. The fund is down 1.34% year to date, trailing the S&P 500 by 6.6%, according to Morningstar. However, it has returned 7% annually over the past five years, more than 6.6 percentage points better than the S&P 500.

Fee Cuts

In addition to picking a new manager, Clipper also indicated that the fund's investment advisory fee will be reduced from the current annual fee of 1% of average daily net assets. Davis Selected Advisers' new fee structure will be based on a sliding scale ranging from 0.65% of the first $500 million of net assets to 0.485% of assets greater than $10 billion.

Furthermore, the company said that for calendar year 2006 it has agreed to voluntarily waive all management fees in excess of 0.50%.

In a note posted on the Morningstar Web site, fund strategist Kunal Kapoor blessed the fund's move, saying he was "pleasantly surprised."

"The Clipper board deserves tremendous credit for breaking from the pack in an all-too-rare act of independence," wrote Kapoor. "It will be interesting to see if its move emboldens other boards, although that might be hoping for too much. Still, it's a step in the right direction."

"We think highly of BHMS, but handing the fund to it would have ensured that the management fees generated by the fund would continue to fall to Old Mutual's bottom line," Kapoor said.